SEC to Consider D.C. Circuit Remand of Fund Governance Rules at June 29, 2005 Open Meeting

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Originally uploaded by governancefocus.

At its open meeting scheduled for June 29, 2005, the SEC is slated to consider the matters remanded to it by the U.S. Court of Appeals for the District of Columbia Circuit (the "Court") in a June 21, 2005 decision. The Court’s decision addressed a petition for review by the U.S. Chamber of Commerce challenging SEC rulemaking that adopted certain additional governance requirements for investment companies ("funds") registered under the Investment Company Act of 1940, as amended (the "1940 Act") (see the August 3, 2004 edition of the Alert for a discussion of these governance requirements in their entirety). The SEC’s open meeting comes one day before the scheduled retirement of SEC Chairman William Donaldson, who along with Commissioners Goldschmid and Campos voted in favor of the challenged requirements while Commissioners Glassman and Atkins voted against them. In its decision, the Court found that the SEC’s rulemaking had not met the requirements of the Administrative Procedure Act (the "APA") and remanded the matter to the SEC to address the deficiencies identified in the Court’s opinion. The particular fund governance provisions challenged by the Chamber of Commerce were those that require any fund relying on certain commonly used exemptive rules under the 1940 Act , e.g., Rule 12b-1, to (a) have a chairman of the board who is not an interested person of the investment company within the meaning of the 1940 Act (an "independent director") and (b) have a board of directors constituted with no less than 75% independent directors.

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